Nabhiraj Ratna Balraj By Legal Heir B.R.Rakesh, Bangalore V. Income-Tax Officer, Ward-7(2)(1), Bangalore

ITA 603/BANG/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1467 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-06-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 31-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value; Capital Gains
• Section: 147; 37; 43CA; 50C; 142(1); 234B; 40(a)(ia); 250; 201; 143(2); 48; 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No. 603/Bang/2024 Assessment year : 2016-17 Nabhiraj Ratna Balraj By L/H Rakesh, C/o. Jwalamala Jewellers, No.17, 9 th Main Road, 36 th Cross, Jayanagar, Bangalore – 560 041. PAN : AARPR 8825M Vs. The Income Tax Officer, Ward 7(2)(1), Bangalore. APPELLANT RESPONDENT Appellant by : Ms. Suman Lunkar, CA Respondent by : Shri Subramanian S., Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 11.06.2024 Date of Pronouncement : 26.06.2024 O R D E R Per Laxmi Prasad Sahu, Accountant Member This appeal is filed by the assessee against the order dated 05.03.2024 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2016-17 on the following grounds:- “1.1 The learned Commissioner of Income tax (Appeals) has erred in confirming the assessment order passed by the Assessing Officer. The Commissioner of Income tax (Appeals) should have ITA No. 603/Bang/2024 Page 2 of 33 on the facts and circumstances of the case, quashed the impugned Assessment Order as bad in law and void ab initio. 1.2 In any case, the appellate order passed in the name of deceased assesse, in spite of specific intimation is bad in law and such order is liable to be quashed. 2.1 The learned Commissioner of Income tax (Appeals) has also erred in confirming the reopening of assessment by learned Assessing Officer. The conditions precedent for issue of notice U/s. 148 of I.T. Act, 1961 having not been satisfied, the reopening of assessment was bad in law and hence the learned Commissioner of Income tax (Appeals) should have instead of confirming the assessment order, quashed the reopening of assessment. 2.2 In any case, the passing of the order without complying with the legal and statutory requirements of reassessment proceeding also makes the order bad in law and such order is liable to be quashed. 3.1 In any case and without prejudice, the learned Commissioner of Income tax (Appeals) has erred in holding that the provisions of Section 50C of the Act are applicable in the instant case and thus confirming the additions made by Assessing officer U/s. 50C of I.T. Act, 1961. On the fact and circumstances of the case and on proper appreciation of law it would be clear that the provisions of Section 50C of I.T. Act, 1961 are not applicable to the case of appellant and thus no addition was called for and the entire addition as made is to be deleted. 3.2 In any case and without prejudice, the authorities below have erred in holding that the first proviso to section 50C of the Act is not applicable to the appellant as the payment towards sale consideration was received much after of the date of agreement to sell. On proper appreciation of facts and law applicable, the conclusion drawn being erroneous is to be disregarded and the guidance value as on the date of sale agreement is to be adopted. 4. In any case, the authorities below have erred in not appreciating the fact that the difference between the guidance value and sale consideration is within the 10% of tolerance limit ITA No. 603/Bang/2024 Page 3 of 33 as prescribed in third proviso to section 50C of the Act which is retrospective in nature. On the facts and circumstances of the case and the law applicable, the leeway of 10% is applicable to the case of appellant hence the addition as made/confirmed being erroneous is to be deleted in entirety. 5. The appellant denies liability to pay Interest U/s. 234B and 234C of I.T. Act, 1961. The interest having been levied erroneously is to be deleted. 6. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the orders passed be quashed or atleast, the addition made u/s 50C of the Act be deleted, returned income be accepted and the interest levied be also deleted.” 2. Briefly stated the facts of the case are that assessee filed return of income on 28.07.2016 declaring total income of Rs.1,76,21,740. Later on action u/s. 147 was initiated on the basis of reasons recorded and notice u/s. 148 was issued on 13.01.2021. The assessee furnished reply. Subsequently other statutory notices were issued to assessee. The assessee had transferred immovable property along with four other co-owners for a total consideration of Rs.8.70 crores and made agreement on 15.12.2014 and received post dated cheques which were encashed on 04.02.2015. The Sale Deed was executed on 21.03.2016. In the sale deed duly registered, first payment was made on 15.12.2014 is also mentioned, however the stamp duty at Rs.9,26,40,000 was paid by the purchaser on execution of sale deed. The AO as per section 50C note that there is a difference of Rs.56,40,000 between consideration received and stamp duty and it was treated as escaped assessment. The assessee’s 1/5th share works out to Rs.11,28,000. The assessee replied to the show cause notice on 18.03.2022 objecting to addition of ITA No. 603/Bang/2024 Page 4 of 33 Rs.11,28,000 relying on various judgments of ITAT. The AO noted that section 50C was amended by the Finance Act 2016 and added proviso which is effective from 01.04.2017 and did not accept the submissions of the assessee and completed assessment by making addition to the total income of assessee. 3. On appeal, the CIT(Appeals) also dismissed the appeal of the assessee. Against this, the assessee is in appeal before the ITAT. 4. The ld. AR reiterated the submissions made before the lower authorities and she pressed ground No.4 and submitted as under:- “ 1. The appellant, an Individual, Sri B. N. Ratna Balraj expired on 16.09.2023. A copy of the Death certificate is filed before the learned CIT(Appeals), NFAC, Delhi vide a separate submission dated 15.01.2024. In this scenario, Sri B. R. Rakesh, one of the legal heirs is filing this submission on behalf of the deceased. 2. The year under appeal is assessment year 2016-17. 3. The appeal filed by the appellant on being aggrieved by order passed u/s 147 r.w.s 144B of the Income Tax Act 1961 dated 21.03.2022 by NfAC, Delhi assessing the appellant at an income of Rs.1,87,49,640/- and raising a demand of Rs.4,36,451/- including interests u/s 234B amounting to Rs.1,82,664/- and 234C amounting to Rs. 812/-. 4. For the year, the appellant had filed a return of Income on 28.07.2016 vide acknowledgement no. 329224870280716 declaring a total income of Rs.1,76,21,640/-. The return of income filed was processed accordingly. The returned income inter alia included income from Long Term Capital Gain of Rs.1,65,93,642/- (1/5th Share). A copy of the financial statements along with the computation of income and acknowledgment for having filed the return of income is enclosed as Annexure – 1. ITA No. 603/Bang/2024 Page 5 of 33 5. During the F.Y. 2014-15 relevant to A.Y. 2015-16, the appellant along with four other brothers / co-owners entered in to an Agreement to Sell dated 15.10.2014 in respect of the vacant site bearing No.638 (P-1) in the layout formed by the Ideal Homes Building Co-Operative Society Ltd, in Sector-D, Phase-1, Kenchanhalli, Bangalore South. The total sale consideration for the sale as per the Agreement to Sell was Rs.8,70,00,000/- of which the appellant’s share (1/5th share) was Rs.1,74,00,000/-. The guidance value of this site as on the date of agreement to sell was Rs.7,01,80,000/-. The entire sale consideration for sale was received through cheque only. 6. The absolute sale deed was executed on 21.03.2016. In the sale deed duly registered, the first payment is stated to be paid through cheque dated 15.12.2014. For this sale deed, the Stamp Duty for the sale was paid by the Purchaser Sri. Bharath G Mehta based on the Government value of Rs. 9,26,40,000/- prevailing on the date of execution of sale deed. 7. The long-term capital gains of Rs. 1,65,93,642/- was computed and offered to tax by the appellant based on sale consideration received as per sale deed dated 21.03.2016. 8. Thereafter, the case of the appellant was reopened and notice u/s. 148 of the Act dated 31.03.2021 was issued on the appellant by ITO, Ward-7(2)(1), Bangalore. In response thereto, the appellant had filed return of income on 17.04.2021 vide acknowledgement no.342267940170421 declaring income as declared originally by the appellant. 9. Simultaneously, the appellant had filed manually a letter dated 13.04.2021 on 19.04.2021 vide acknowledgement no.222262110005 in which the appellant had objected to the very issue of notice u/s. 148. In this letter, the appellant had also asked for copy of reasons recorded for issue of notice u/s. 148 of the Act. 10. a) In response thereto, the appellant received letter dated 30.06.2021 from the learned Assessing Officer, W-7(2)(1), Bangalore stating that the details asked for by the appellant in letter dated 13.04.2021, i.e. copy of reasons and satisfaction obtained, could not be revealed before filing return of income in response to notice issued u/s. 148 of the Act. ITA No. 603/Bang/2024 Page 6 of 33 b) In response to the above letter dated 30.06.2021, the appellant manually filed a letter dated 01.07.2021 on 07.07.2021 vide acknowledgement no. 222262110010 with ITO, Ward- 7(2)(1), Bangalore stating the fact that the appellant had already uploaded the return of income electronically in response to notice u/s 148 on 17.04.2021 and that this return was filed in response to notice issued u/s 148 dated 31.03.2021. c) Further, the appellant requested that in the light of dictum of Supreme Court, the appellant may kindly be given: 1) A copy of the reasons if any recorded for the issue of notice u/s. 148 of the Act. 2) Copy of the satisfaction obtained from the Range -7(1), Bangalore (as noted in the notice issued u/s 148). d) The appellant has not been provided the reasons for reopening, though the appellant in its letter filed against the issue of notice u/s. 148, requested for a copy. e) The Supreme Court in G. K. N. Driveshafts [2003] 259 ITR 19 had specifically directed that when a notice under section 148 of the said Act is issued and the noticee files a return and seeks reasons for the issuance of the notice, the Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of the reasons, the noticee is entitled to file objections to the issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. These are specific directions given by the Supreme Court in all cases where notices under section 148 of the said Act are issued. f) Reliance is also placed on the decisions rendered in the following cases: • PCIT vs V. Ramaiah, 103 taxmann.com 201 (Kar) • PCIT vs V. Ramaiah, 103 taxmann.com 202 (SC) SLP dismissed • CIT vs Trend Electronics (Bom) ITA No.1867 of 2013 • PCIT vs Samcor Glass Ltd. & Anr (Delhi HC) ITA No. 603/Bang/2024 Page 7 of 33 g) The assessing officer having not followed the procedure laid down by the Supreme Court, makes the order passed bad in law and hence the order as passed is required to be quashed. 11. Subsequently, a notice u/s. 143(2) r.w.s 147 dated 06.10.2021 was issued on the appellant by the assessing officer, Ward-7(2)(1), Bangalore. However, no response was filed to this notice. Thereafter, several notices u/s. 142(1) on various dates were issued and served electronically on the appellant. In compliance to the notices, appellant e-filed detailed replies on 30.11.2021, 22.01.2022 and 09.03.2022. The appellant in response to these notices, stated that the provisions of section 50C are not applicable in case of the appellant as the case of the appellant is covered by the provisos to section 50C(1) of the Act. In support of the above views, the appellant submitted all the relevant details and documents. 12. Thereafter, the appellant had received show cause notice dated 15.03.2022 along with a draft assessment order. In response thereto, the appellant had e-filed a detailed reply explaining that the provisos to section 50C of the Act are applicable and that the consideration received on sale being more than the guidance value on the date of agreement to sell, the addition should not be made to returned income. It was also stated in the letter that even otherwise, the difference in the sale consideration received and the guidance value on the date of sale was within the tolerance limit of 10%. 13. a) However, the learned Assessing Officer did not accept the submissions of the appellant and passed assessment order u/s.147 r.w.s 144B dated 21.03.2022 by making addition of Rs.11,28,000/- to the returned income under the head capital gains on the following grounds: a. That the payment encashed on 04.02.2015 towards sale consideration has been received by the appellant long after the date of agreement to sell i.e., 15.10.2014 and that the second proviso to section 50C of the Act will be applicable only if the payment is received on or before the agreement. b. That the First and second provisos to section 50C(1) of the Act have been implemented w.e.f 01.04.2017 i.e. FY 2017-18 relevant to AY 2018-19. However, the case of the appellant pertains to AY 2016-17 and hence does not fall under this proviso. ITA No. 603/Bang/2024 Page 8 of 33 b) Against this order dated 21.03.2022, the appeal is filed by the appellant. 14. The appellant has disputed the impugned assessment order on Technical Points as well as on Merits of the case. 15. During F.Y. 2014-15 relevant to A.Y. 2015-16, the appellant had along with four other co-owners who are all brothers of the appellant entered in to an Agreement to Sell dated 15.10.2014 in respect of the vacant site situated at Ideal Homes Building Co- Operative Society Ltd, in Sector-D, Phase-1, Kenchanhalli, Bangalore South. The total sale consideration for the sale as per agreement to sell was Rs. 8,70,00,000/- of which appellant’s share was Rs. 1,74,00,000/-. 16. At the time of entering in to this sale agreement, the purchaser Sri. Bharath G Mehta had given advance for property via cheques amounting to Rs. 1,00,00,000/- of which appellant’s share was Rs. 20,00,000/- (1/5th share), which is detailed at page 5 of Agreement to Sell dated 15.10.2014 which is reproduced as follows; [ THIS PAGE IS LEFT BLANK INTENTIONALLY ] ITA No. 603/Bang/2024 Page 9 of 33 Copy of Agreement to Sell is enclosed as Annexure – 2. 17. The guidance value of this site as on the date of agreement to sell was Rs. 7,01,80,000/- (14036 Square Feet X Guidance Value 5000/- per sq. feet). A copy of Guidance value report is enclosed as Annexure – 3. 18. Thereafter, the absolute sale deed was executed on 21.03.2016. The total sale consideration as per sale deed was Rs. 8,70,00,000/- of which the appellant’s share was Rs. 1,74,00,000/-. It can be seen that the sale consideration of Rs. 8,70,00,000/- as per the sale deed is the same as per the Agreement to Sell dated 15.10.2014. In the sale deed duly registered also the first payment is stated as cheque dated 15.12.2014. A copy of the sale deed is enclosed as Annexure – 4. 19. However, the Stamp Duty for the sale was paid by the purchaser Sri. Bharath G Mehta based on the Government value of Rs. 9,26,40,000/- prevailing on the execution of sale deed. 20. As stated above, the agreement to sell was entered into on 15.10.2014 and the absolute sale deed was executed on 21.03.2016. As on the date of entering into the agreement to sell, the guidance value as per special state gazette issued under notification dated 07.08.2013 was applicable and the guidance value as on date of agreement to sell was Rs.7,01,80,000/- only, as against guidance value of Rs.9,26,40,000/- prevailing on the execution of sale deed. Copy of the guidance value notification is enclosed as Annexure – 5. 21. The guidance value in the area was enhanced to as per notification later to date of agreement to sell. 22. As stated above, the agreement to sell was entered into on 15.10.2014 and the entire sale consideration for the sale was received through cheques only. The cheque dated 15.12.2014 paid as advance as per agreement to sell was encashed on 04.02.2015. 23. Though there was a delay in realization of cheque, yet it was presented and cleared within 3 months from the date of issue of cheque. Hence, the date of payment would go back to the date of issue of cheque. ITA No. 603/Bang/2024 Page 10 of 33 24. The date of first realisation of cheque is 04.02.2015 which would date back to the date of issue of cheque which is 15.12.2014. Thus, it is crystal clear that the first payment realised on 04.02.2015 will go back to the date of issue of cheque as mentioned in the Agreement to sell i.e., 15.12.2014. 25. The late realization of cheque does not in any way invalidate / negate the effect of agreement. The agreement was quite valid, effective and is totally implemented. The significance of the agreement cannot be given a go by. It is pertinent to note that the said cheque is not bounced / dishonoured. In any case, the allegation that this was also done to evade tax is baseless allegation. There was absolutely no colourable devise to avoid tax. 26. In fact, the very fact that at the time of entering into the agreement to sell, the appellant had undertaken to receive the advance money of Rs.20,00,000/- (1/5th share) towards sale of property, in various instalments via post-dated cheque i.e., 15.12.2014, would go to show that a part of the sale consideration was received on the date of agreement to sell and the same cannot be doubted. It cannot be said that no consideration was received on the date of agreement. In fact, the execution of the Sale Deed is in pursuance of the agreement to sell executed by the parties. Hence, the appellant has satisfied the first and second proviso to section 50C of the Act. Accordingly, the guidance value prevailing on the date of agreement to sell is to be adopted for the purpose of computing the sale consideration as per section 50C of the Act. 27. The learned assessing officer states in page 2 of the assessment order as below : “On examination of the submitted documents it is noticed that the cheque stated to have been received by the assessee has been encashed on 4/2/2015. The agreement has been made on 15/10/2014. Therefore, it is certain that the payment has been received by the assessee long after the agreement.” The appellant submits that none of the provisions of section 50C speak of encashment of cheque. What is material is the date of payment on or before the date of agreement. In common parlance, a post-dated cheque has a validity period of 3 months from the date of its issuance. Where such a cheque is encashed within the above said ITA No. 603/Bang/2024 Page 11 of 33 time limit, the date of payment goes back to the original date of the cheque and not the date of its encashment. 28. It is pertinent to note that the final sale deed and the encashment of cheque did not alter the nature of transfer of the immoveable property in the hands of the appellant nor did it alter the sale value fixed in the agreement to sale. The appellant cannot be fastened with the liability of higher rate of valuation of the property. 29. The case of the appellant is clearly governed by first and second proviso to section 50C of the Act and since the consideration received on sale is not less than the guidance value on the date of agreement to sell, there is no question of any addition to income. 30. For the sake of convenience, provision of 50C are reproduced as follows; Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer : Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account ITA No. 603/Bang/2024 Page 12 of 33 39[or through such other electronic mode as may be prescribed40], on or before the date of the agreement for transfer: Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and 41[ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration. (2) Without prejudice to the provisions of sub-section (1), where— (a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth- tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation 1.—For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2.—For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty. ITA No. 603/Bang/2024 Page 13 of 33 (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. 31. General background of Section 50C a) Generally, in a transaction of transfer of land or building or both (‘asset”) there is a considerable time gap between the date when the vendor agrees to sell the asset and the date of actual transfer by way of a registered instrument to the buyer. The price is fixed between the parties at the time of entering into an agreement to sell. Thereafter, the buyer investigates the title of the vendor, payment is made and the document of transfer, generally, a conveyance is executed and registered in favour of the buyer. b) Based on the language of section 50C, prior to its amendment by the FA, 2016, it was possible to take a view that the stamp duty value as on the date of transfer has to be compared with the consideration stated in the instrument of transfer and if the stamp duty value as on the date of transfer is more than the consideration stated in the instrument of transfer, the stamp duty value is to be regarded as full value of consideration for computing capital gains arising on transfer of such asset. c) Even when section 50C did not have a provision similar to the one contained in the proviso to section 56(2)(vii)(b)(ii) or the one contained in sub-sections (3) and (4) of section 43CA of the Act, the Tribunal has in the following cases held that in a case where the date of agreement for transfer is different from the date of transfer, the stamp duty value as on the date of agreement and not the stamp duty value as on the date of transfer is to be considered as full value of consideration. 32. Reliance is placed on following judicial pronouncements wherein it is held that Stamp Duty Valuation on date of agreement is to be treated as full value of consideration. ITA No. 603/Bang/2024 Page 14 of 33 a) Kodani Satya Srinivas Vijayawada v. ACIT (ITAT – Visakhapatnam) [ITA No. 556 & 557/Vizag/2008; AY : 2006-07; Date of order: 2.7.2010] b) Lahiri Promoters v. ACIT (ITAT-Visakhapatnam) [ITA No. 12/Vizag/2009; AY : 2006-07; Date of order: 22.6.2010] c) ITO v. Modipon Ltd. (ITAT – Delhi) [ITA No. 2049/Del/2009; AY:2005-06; Date of order: 9.1.2015] d) Mohd. Imraan Baug v. ITO (ITAT – Hyderabad) [ITA No. 1942/Hyd/2014; AY : 2006-07; Date of order: 27.11.2015] e) Moole Rami Reddy v. ITO (ITAT-Visakhapatnam) [ITA No.311/Vizag/ 2010; AY : 2006-07; Date of order: 10.12.2010] f) Parekh Marketing Ltd. v. ACIT (ITAT-Mumbai) [ITA No.4307/Mum/2013; AY : 2008-09; Date of order: 26.5.2015] 3. Insertion of 2 provisos to Section 50C by Finance Act, 2016 The Finance Act, 2016 has amended the provisions of section 50C of the Act by inserting the following two provisos with effect from 1.4.2017– “Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer. Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer.” 34. Explanatory Memorandum to the Finance Bill, 2016 The Explanatory Memorandum to the Finance Bill, 2016 states as under – ITA No. 603/Bang/2024 Page 15 of 33 “Rationalization of Section 50C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property. Under the existing provisions contained in Section 50C, in case of transfer of a capital asset being land or building or both, the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty shall be taken as the full value of consideration for the purposes of computation of capital gains. The Income Tax Simplification Committee (Easwar Committee) has in its report, pointed out that this provision does not provide any relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of the Act i.e. when an immovable property is sold as a stock-in-trade. It is proposed to amend the provisions of section 50C so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration. It is further proposed to provide that this provision shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property. These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply to assessment year 2017-18 and subsequent years.” 35. Is the proviso inserted by Finance Act, 2016 retrospective? Ahmedabad Tribunal in the case of Dharamshibhai Somani v. ACIT [(2016) 161 ITD 627 (Ahd. – Trib.)(SMC)] (ITA No. 1237/Ahd/2013; AY 2008-09; order dated 30.9.2016)(Ahd Trib SMC) was dealing with the case of an assessee who had entered into an agreement to sell certain agricultural land on 29th June, 2005 for ITA No. 603/Bang/2024 Page 16 of 33 a consideration of Rs. 45 lakh. The final sale deed was executed on 24th April, 2007. The delay in registration was due to time taken for procedure of converting agricultural land into non-agricultural land for the purchaser who was a private limited company. The AO computed capital gains on transfer of land by adopting stamp value prevalent on the date of registration in April 2007 which was much higher than the consideration agreed to under the agreement to sell dated 29th June, 2005. The assessee contended that in the facts of his case, the stamp duty value of 2007 is not relevant to determine the capital gains tax liability. Aggrieved, the assessee filed an appeal to CIT(A) who upheld the action of the AO. 36. The Ahmedabad Bench of the Tribunal, in the case of Dharamshibhai Somani v. ACIT [(2016) 161 ITD 627 (Ahd. – Trib.)(SMC)](ITA No. 1237/Ahd/2013; AY 2008- 09; order dated 30.9.2016)(Ahd Trib SMC) held that - The present amendment, being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect; The proviso to section 50C should also be treated as curative in nature and with retrospective effect from 1st April, 2003, i.e. the date effective from which Section 50C was introduced The Tribunal has observed that the amendment is one step short of what ought to have been done in as much as the amendment, in tune with the judge made law, ought to have been effective from the date on which the related legal provisions were introduced. 37. Dharamshibhai Somani v. ACIT(Ahd Trib SMC) – observes that the proviso inserted by FA, 2016 is optional to the assessee The Tribunal has made the following observations which are to the effect that the amendment is optional to the assessee – ITA No. 603/Bang/2024 Page 17 of 33 “The amendment in Section 50C was brought in to provide relief to the assessee in a situation in which the stamp duty valuation of a property has risen between the date of execution of agreement to sell and execution of sale deed, as is the norm rather than exception, but the real estate market is now traversing through a difficult phase and there can be situations in which there is a fall in the stamp duty valuation rates with the passage of time. Such a situation has actually arisen in many places in the country, such as in Gurgaon, New Delhi and even in Dehradun (Uttarakhand) and some other places. It is therefore possible that, at first sight, first proviso to Section 50C may seem to work to the disadvantage of the assessee in certain situation in the event of the word `may’ being construed as mandatory in application, but then one cannot be oblivious to the fact that this proviso states that the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer (emphasis supplied)” making it clearly optional to the assessee and that in any event, what has been brought by the lawmakers as a measure of relief to the taxpayers cannot be construed as resulting in a higher tax burden on the tax payers. Of course, assuming my understanding of this statutory provision is in harmony with the legislative intention, insertion of the words “at the option of the assessee” between ‘stamp valuation authority on the date of agreement may” and “be taken for the purposes of computing full value of consideration for such transfer”, in the first proviso to Section 50C(1) could have made the legal provision even more unambiguous. 38. Division Bench decisions on the lines of Dharamshibhai Somani [(2016) 161 ITD 627 (Ahd. – Trib.)(SMC)] a) Amit Bansal v. ACIT [(2018) 100 taxmann.com 334 (Delhi – Trib.)] b) Devendra J. Mehta v. ACIT [(2017) 77 taxmann.com 282 (Rajkot – Trib.)] c) Goldgerg Finance Pvt. Ltd. v. ACIT [(2017) 78 taxmann.com 123 (Mumbai – Trib.)] d) Hari Mohan Das Tandon v. Pr. CIT [(2018) 91 taxmann.com 199 (Allahabad – Trib.)] e) Rahul G. Patel v. DCIT [(2018) 97 taxmann.com 598 (Ahmedabad-Trib.)] ITA No. 603/Bang/2024 Page 18 of 33 f) Smt. Chalasani Naga Ratna Kumari v. ITO [(2017) 79 taxmann.com 104 (Visakhapatnam – Trib.)] Thus, it can be seen that though the first proviso is inserted from 01.04.2017, the effect thereof is retrospective is applicable to appellant for the year. 39. From the above detailed discussion, it is very clear that the benefit of proviso is applicable retrospectively and further in the appellant’s case all the advances have come by cheque. Therefore, the appellant is fully entitled to benefit given under the law and on proper consideration it will be clear that there is no understating of consideration and hence no variation is called for. Alternatively, without prejudice, the appellant wishes to submit as follows; 40. Even otherwise alternatively the case of the appellant is also saved by the third proviso to sec. 50C. a) Insertion of third proviso to section 50C by Finance Act, 2018 The Finance Act, 2018 has further amended the provisions of section 50C of the Act by inserting the following third proviso with effect from 1.4.2019 i.e. effective Assessment Year 2019-20 – “Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.” Third proviso to section 50C(1) provides that stamp duty value of the capital asset transferred will be deemed to be full value of consideration only if stamp duty value exceeds 105 per cent of the consideration received or accruing as a result of transfer The Finance Act, 2020 has further amended the provisions of section 50C of the Act by inserting the following third proviso with effect from 1.4.2021 i.e. effective Assessment Year 2021-22 ITA No. 603/Bang/2024 Page 19 of 33 Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and ten per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration. Third proviso to section 50C(1) provides that stamp duty value of the capital asset transferred will be deemed to be full value of consideration only if stamp duty value exceeds 110 per cent of the consideration received or accruing as a result of transfer b) Tolerance Limit introduced in section 50C Prior to its amendment by the Finance Act, 2018 / 2020, section 50C provided that where a person transfers a capital asset being land or building or both and if the consideration received or accruing as a result of transfer was less than the stamp duty value of the capital asset transferred then for the purpose of computing capital gains, stamp duty value was to be regarded as full value of consideration Finance Act, 2018 / 2020 has inserted a third proviso to section 50C(1) which provides that stamp duty value of the capital asset transferred will be deemed to be full value of consideration only if stamp duty value exceeds 105 / 110 per cent of the consideration received or accruing as a result of transfer. c) Position prior to introduction of tolerance Limit in section 50C As far as period upto AY 2018-2019 is concerned, either the ratio of the aforesaid judgments, favorable to the taxpayer, will apply or atleast a variation of 5% ought to be permitted based on subsequent amendment. Option for approaching Valuation Officer, under section 50C(2), for valuing property in question continues to be available even subsequent to the amendment. ITA No. 603/Bang/2024 Page 20 of 33 Illustration Particulars Situation 1 Situation 2 Consideration as per agreement of transfer 10,000 10,000 Stamp duty value 12,000 10,400 Stamp duty value as a percentage of declared consideration 120% 104% Whether stamp duty value exceeds 105% of consideration as per agreement of transfer Yes No Consideration for computing capital gains 12,000 10,000 d) Why the Safe Harbour Limit of 10% Should be Retrospective? Legal maxim 'Law Prospicit Non Respicit' presumes law to be prospective & not retrospective. However, where the legislation is enacted with a purpose of mitigating undue hardship the provision in such a case has to be given a reasonable & equitable construction & has to be considered to be retrospective in nature so as to make the provisions workable. The rule of beneficial construction should apply in such a case. Hon. Apex Court has followed reasonable construction instead of strict interpretation in the following cases:- 1. R.B. Jodha Mal Kuthiala vs. CIT 82 ITR 570 (SC) [1971] 2. CIT vs. J.H. Gotla 156 I.T.R. 323(SC) [1985] 3. Good Year India Ltd. vs. State of Haryana 188 ITR 402 SC [1991] e) In CIT v. Calcutta Export Company (SC) (2018) 93 taxmann.com 51. The issue before the Hon. Apex Court was whether the amendment to sec 40(a)(ia) by Finance Act 2010 can be considered to be retrospective in nature. The hon. Apex Court after considering the relevant schema of Section 40(a)(ia) & taking into consideration the purpose of the amendment was to mitigate undue hardship held the amendment to be retrospective in nature. ITA No. 603/Bang/2024 Page 21 of 33 f) Is the tolerance limit of 10% retrospective? i. Finance Act, 2018 has w.e.f. 1.4.2019 inserted third proviso to Section 50C which provides for a tolerance limit of 5% of the consideration received or accruing as a result of the transfer. ii. The limit of 5% has been increased to 10% by the Finance Act, 2020 w.e.f. 1.4.2021. iii. A question arises as to whether the tolerance limit is prospective from the date of its introduction or is retrospective? If it is retrospective, it is retrospective since when? iv. Amendment made in scheme of section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis-à-vis stamp duty valuation from 5 per cent to 10 per cent are effective from date on which section 50C, itself was introduced, i.e 1-4-2003 - Maria Fernandes Cheryl v. ITO, International Taxation [(2021) 123 taxmann.com 252 (Mumbai - Trib.)] v. The Tribunal noted that – vi. Central Board of Direct Taxes circular No. 8 of 2018, explaining the reason for the insertion of the third proviso to section 50C(1), has observed that 'It has been pointed out that the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location'. vii. Once the CBDT itself accepts that these variations could be on account of a variety of factors, essentially bona fide factors, and, for this reason, section 50C(1) should not come into play, it was an 'unintended consequence' of section 50C(1) that even in such bona fide situations, this provision, which is inherently in the nature of an anti-avoidance provision, is invoked. viii. Once this situation is sought to be addressed, this situation needs to be addressed in entirety for the entire period in which such legal provisions had effect, and not for a specific time period only ix. The Tribunal observed that – ITA No. 603/Bang/2024 Page 22 of 33 x. On a conceptual note, an estimation of market price is an estimation nevertheless, even if by a statutory authority like the stamp duty valuation authority, and such a valuation can never be elevated to the status of such a precise computation which admits no variations. The rigour of section 50C(1) was thus relaxed, and very thoughtfully so, to take these bona fide cases of small variations between the stated sale consideration vis-à-vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. It is a case of a curative amendment to take care of unintended consequences of the scheme of section 50C. xi. Parliament has introduced third proviso in section 50C(1) of the Act, as per which the difference in stamp duty valuation and actual consideration should be ignored, if it is less than 5%/10%. The Kolkata Bench of Tribunal has held it to be curative in nature in the case of Chandra Prakash Jhunjhunwala [2019 (8) TMI 1192 - ITAT KOLKATA] has held that the proviso shall apply since the date of insertion of sec.50C of the Act. The Tribunal was of the view that even prior to introduction of the proviso the Tribunals were allowing a variation of upto 10%. It also noted that the amendment is procedural in nature. xii. Reliance is placed on decision rendered by Mumbai Tribunal in the case of Joseph Mudaliar v. Deputy Commissioner of Income-tax, CC-4(3), Mumbai [2021] 130 taxmann.com 250 (Mumbai - Trib.) Dated 14.09.2021 wherein it was held that Amendment made in section 50C(1) by inserting third proviso by Finance Act, 2018, with effect from 1-4-2019 is curative in nature and same would apply retrospectively. xiii. Reliance is also placed on the decision rendered by jurisdictional Bangalore ITAT and other tribunals where in it was held that Amendment made in scheme of section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis-à-vis stamp duty valuation from 5 per cent to 10 per cent are effective from date on which section 50C, itself was introduced, i.e 1-4-2003. a) Sandeep Patil vs ITO in ITA no 924/Bang/2019 dated 09.09.2020 for AY 2016-17. (ITAT Bangalore) ITA No. 603/Bang/2024 Page 23 of 33 b) Maria Fernandes Cheryl vs ITO 123 Taxmann 252/2021/Mum dated 15.01.2021. for AY 2011-12 c) Mamatha Divakar Shetty vs ITO in ITA No. 1204/H/2017 dated 30.09.2021. for AY 2009-10 (ITAT Hyderbad) d) Amrapali Cinema Vs. ACIT, [2021] 127 Taxmann.com 376 (Delhi - Trib.) dated 28.04.2021 for AY 2012-13 xiv. The relevant paras of the above judgements are reproduced as follows; a) Sri Sandeep Patil, Bangalore vs Income Tax Officer, Ward- 1(3)(5) dated 9.09.2020. We also notice that the Parliament has introduced third proviso in section 50C(1) of the Act, as per which the difference in stamp duty valuation and actual consideration should be ignored, if it is less than 5%/10%. Even though the said provision has come into effect from 1.4.2019/1.4.2021, we notice that the Kolkata Bench of Tribunal has held it to be curative in nature in the case of Chandra Prakash Jhunjhunwala (supra) and accordingly held that the proviso shall apply since the date of insertion of sec.50C of the Act. Accordingly, the above said reasoning given by the Kolkata bench of ITAT also supports the contentions of the assessee. In view of the foregoing discussions, we find merit in the prayer of the assessee. We notice that the addition of Rs.15,92,800/- sustained by Ld CIT(A) works out to less than 10% of the actual consideration of Rs.2,33,00,000/- paid by the assessee. Accordingly, we modify the order passed by Ld. CIT(A) and direct the A.O. to ignore the difference between fair market value determined by CIT(A) and the actual consideration as the same is less than 10% of the actual consideration. b) Maria Fernandes Cheryl v. Income Tax Officer, (International Taxation), 2(3)(1) (ITAT Mumbai) [2021] 123 taxmann.com 252 (Mumbai - Trib.) dated 15.01.2021. Para 7 of the decision makes a reference to the Central Board of Direct Taxes (CBDT) Circular (Circular No. 8 of 2018): ITA No. 603/Bang/2024 Page 24 of 33 “These submissions, however, do not impress us. As noted by the Central Board of Direct Taxes circular # 8 of 2018, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed that "It has been pointed out that the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location". Once the CBDT itself accepts that these variations could be on account of a variety of factors, essentially bonafide factors, and, for this reason, Section 50C(1) should not come into play, it was an "unintended consequence" of Section 50(1) that even in such bonafide situations, this provision, which is inherently in the nature of an anti-avoidance provision, is invoked. Once this situation is sought to be addressed, as is the settled legal position- as we will see a little later in our analysis, this situation needs to be addressed in entirety for the entire period in which such legal provisions had effect, and not for a specific time period only. There is no good reason for holding the curative amendment to be only as prospective in effect.” 7. ............ The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis- à-vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of Section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of Section 50C, i.e. 1st April 2003. ITA No. 603/Bang/2024 Page 25 of 33 In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti-avoidance provisions under section 50C will not be invoked. 8. Once legislature very graciously accepts, by introducing the legal amendments in question, that there were lacunas in the provisions of Section 50C in the sense that even in the cases of genuine variations between the stated consideration and the stamp duty valuation, anti- avoidance provisions under section 50C could be pressed into service, and thus remedied the law, there is no escape from holding that these amendments are effective with effect from the date on which the related provision, i.e., Section 50C, itself was introduced. These amendments are thus held to be retrospective in effect. In our considered view, therefore, the provisions of the third proviso to Section 50C (1), as they stand now, must be held to be effective with effect from 1st April 2003. c) Mamatha Divakar Shetty vs ITO in ITA No. 1204/H/2017 for AY 2009-10 dated 30.09.2021. (ITAT Hyderabad) 9. ............ Further, on going through the latest amendments made by the Finance Act, in section 50C(1), 3rd proviso, where the value adopted or assessed or assessable by the same valuation authority does not exceed 10% of the consideration received or accruing as a result of transfer of consideration so received or accruing as a result of the transfer shall for the purpose of section 48 deemed to be the full value of the consideration. As per the above proviso, it is clear that if there is variation of 10% of stamp duty value adopted by the SRO or the value shown by the assessee for computation of capital gains, in such a case, the value offered for tax by the assessee is to be adopted and section 50C does not apply to the case of the assessee. ITA No. 603/Bang/2024 Page 26 of 33 This amendment take effect as retrospective in nature and this view is supported by the decisions of the coordinate benches of ITAT, which are as under: 1. Maria Fernandes Cheryl Vs. ITO, [2021] 123 Taxmann.com 252 (Mumbai -Trib.) 2. Amrapali Cinema Vs. ACIT, [2021] 127 Taxmann.com 376 (Delhi-Trib.) 9.1. The assessee in AY 2012-13, has taken the value of Rs. 9,44,98,000/- whereas Pr. CIT adopted the value of Rs. 9,75,22,000/-, which is less than 10% as per the amended provision. Considering the above judgments, we are of the view that the order passed by the AO is not erroneous and prejudicial to the interests of revenue, as held by the Pr. CIT. g) Therefore, the case of the appellant is covered by the leverage of 10% granted by the law and therefore also no additions can be made in hands of the appellant for the year. 41. In view of the above discussion, it is erroneous to conclude that since the case of the appellant is for the period before assessment year 2016-17, the difference of 5% is only to be considered. As has been held judicially and as explained above, the benefit provision of 10% differential is available even for earlier years. 42. The appellant had fully declared the capital gains as per the return of income filed u/s.139. Further there are no undisclosed transactions. The appellant had fully accounted and declared all the income including income from capital gains and no addition can be made as explained above. 43. In view of the above submissions made, as explained, there is no escapement of income. 44. In view of the above submissions made the appellant requests that the order as made be quashed or atleast all the additions made in the order be deleted and interest levied be also deleted. ITA No. 603/Bang/2024 Page 27 of 33 45. The appellant denies the consequential interest levied under section 234B and 234C of the Act. The interest being levied is erroneous, incorrect and excessive and needs to be deleted. 46. The appellant prays and submits accordingly.” 5. The ld. AR also relied on Amrapali Cinema Vs. ACIT, [2021] 127 Taxmann.com 376 (Delhi-Trib.) order dated 28.4.2021. 6. The ld. DR relied on the orders of lower authorities. 7. Considering the rival submissions, we note that the dispute is only with regard to applicability of section 50C of the Act and stamp duty value adopted by the Registering Authority of Rs.9,26,40,000. The agreement is made on 15.10.2014 for Rs.8,70,00,000. Accordingly there is a difference of Rs.56,40,000. The Sale Deed was registered on 21.03.2016. The payment is received by the assessee through Post Dated Cheques which was encashed on 04.02.2015. Considering the entire arguments noted supra, as per the mandate provisions the tolerance band of 10% was introduced by the Finance Act, 2018. The difference between the sale consideration received and stamp duty valuation is less than 10% of the tolerance limit as per section 50C(1) third proviso, for purpose of section 48, be deemed to be the full value of the consideration. The amendment made is retrospective as per the judgment of the coordinate Bench of Tribunal in Amrapali Cinema Vs. ACIT, [2021] 127 Taxmann.com 376 (Delhi- Trib.) wherein it is held as under:- ITA No. 603/Bang/2024 Page 28 of 33 “ 8. We have heard the rival contentions and perused the material available on record. We find that there is no dispute with regard to fact that fair market value determined by the DVO at Rs. 8,89,63,168/- against the actual sale consideration of Rs. 8,78,00,000/- as disclosed in Sale Deed. The resulting difference is Rs. 11,63,168/- which is 1.02%. The Co-ordinate Bench of this Tribunal in the case of Maria Fernandes Cheryl (supra) has held as under:— 7. 'These submissions, however, do not impress us. As noted by the Central Board of Direct Taxes circular # 8 of 2018, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed that "It has been pointed out that the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location". Once the CBDT itself accepts that these variations could be on account of a variety of factors, essentially bona fide factors, and, for this reason, Section 50C(1) should not come into play, it was an "unintended consequence" of Section 50(1) that even in such bona fide situations, this provision, which is inherently in the nature of an anti-avoidance provision, is invoked. Once this situation is sought to be addressed, as is the settled legal position- as we will see a little later in our analysis, this situation needs to be addressed in entirety for the entire period in which such legal provisions had effect, and not for a specific ITA No. 4850/Mum/2019 Assessment year: 2011-12 time period only. There is no good reason for holding the curative amendment to be only as prospective in effect. Dealing with a somewhat materially identical situation in the case of Rajeev Kumar Agarwal v. ACIT [(2014) 45 taxmnann.com 555 (Agra)] wherein a coordinate bench was dealing with the question whether insertion of a proviso to Section 40(a)(i) to cure intended consequence could have retrospective effect, even though not specifically provided for, and speaking through one of us (i.e. the Vice President), the coordinate bench had, after a detailed analysis of the legal position, observed that, "Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid ITA No. 603/Bang/2024 Page 29 of 33 unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced". Referring to this decision, and extensively reproducing from the same, including the portion extracted above, Hon'ble Delhi High Court, in the case of CIT v. Ansal Landmark Township Pvt Ltd. [(2015) 61 taxmann.com 45 (Del)], has approved this approach and observed that "(t)he Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance". The same was the path followed by another bench of this Tribunal in the case of Dharmashibhai Sonani v. ACIT [(2016) 161 ITD 627 (Ahd)] which has been approved by Hon'ble Madras High Court in the judgment reported as CIT v. Vummudi Amarendran [(2020) 429 ITR 97 (Mad)]. The question that we must take a call on, therefore, is as to what is the rationale behind the insertion of the third proviso to section 50C(1), and if that rationale is to provide a remedy for unintended consequences of the main provision, we must hold that the third proviso to section 50C(1) comes into force with effect from the same date on which the main provision, unintended provisions of which are sought to be nullified, itself was brought into effect. Let us understand what the nature of the provisions of Section 50C is. In terms of this provision, if the property is sold below the stamp duty valuation rate, which is often called circle rate, this stamp duty valuation report is assumed as sale consideration for the property in question, and, accordingly, capital gains tax is levied. This deeming fiction to substitute apparent sale considerations by notional consideration computed on the basis of a stamp duty valuation rate, was thus to address the issue with respect to potential evasion of taxes by understating the sale consideration amount in a sale deed. As noted by the CBDT, while explaining the justification for insertion of section 50 C, "(t)he Finance Act, 2002, has inserted a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property". Section 50C, thus, on a conceptual note, is a provision to address capital gains tax evasion on account of understatement of the ITA No. 603/Bang/2024 Page 30 of 33 consideration. Of course, the law provides, under section 50C(2), that wherever an assessee claims that the actual market rate is less than the stamp duty valuation, he can have the matter referred to a Departmental Valuation Officer for the ascertainment of the market value, but then it is a (ITA No. 4850/Mum/2019 Assessment year: 2011-12) cumbersome procedure and, at the end of the day, every valuation, whether by the departmental valuation officer or under the stamp duty valuation notification, is an estimate, and there can always be bona fide variations, though to a certain limited extent, in these estimations. Unless, therefore, some kind of a tolerance band or a safe harbour provision, in respect of such bona fide variations, is implicit in the scheme of law, the assessees are bound to face undue hardships. The mechanism under section 50C proceeds on the assumption that when the sale consideration is less than the stamp duty valuation, the sale consideration is to be treated as understated. This assumption is, however, laid to rest when the variations between the stated consideration and the stamp duty valuation figure are treated as explained. The insertion of the third proviso to section 50C(1) provides for this tolerance band with respect to a certain degree of variations between the stamp duty valuation and the stated consideration of an immovable property. In other words, as long as the variations are within the permissible limits, the anti- avoidance provisions of section 50C do not come into play. As we have noted earlier, the CBDT itself accepts that there could be various bona fide reasons explaining the small variations between the sale consideration of immovable property as disclosed by the assessee vis-à-vis the stamp duty valuation for the said immovable property. Obviously, therefore, disturbing the actual sale consideration, for the purpose of computing capital gains, and adopting a notional figure, for that purpose, will not be justified in such cases. On a conceptual note, an estimation of market price is an estimation nevertheless, even if by a statutory authority like the stamp duty valuation authority, and such a valuation can never be elevated to the status of such a precise computation which admits no variations. The rigour of section 50C(1) was thus relaxed, and very thoughtfully so, to take these bona fide cases of small variations between the stated sale consideration vis-à-vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. In our humble ITA No. 603/Bang/2024 Page 31 of 33 understanding, it is a case of a curative amendment to take care of unintended consequences of the scheme of Section 50C. It makes perfect sense, and truly reflects a very pragmatic approach full of compassion and fairness, that just because there is a small variation between the stated sale consideration of a property and stamp duty valuation of the same property, one cannot proceed to draw an inference against the assessee, and subject the assessee to practically prove his being truthful in stating the sale consideration. Clearly, therefore, this insertion of the third proviso to section 50C(1) is in the nature of a remedial measure to address a bona fide situation where there is little justification for invoking an anti-avoidance provision. Similarly, so far as enhancement of tolerance band to 10% by the Finance Act 2020, is concerned, as noted in the CBDT circular itself, it was done in response to the representations of the stakeholders for enhancement in the tolerance band. Once the Government acknowledged this genuine hardship to the taxpayer and addressed the issue by a suitable amendment in law, the next question was what should be a fair tolerance band for variations in these values. As a responsive Government, which is truly the hallmark of the present Government, even though the initial tolerance band level was taken at 5%, in response to the representations by the stakeholders, this tolerance band, or safe harbour provision, was increased to 10%. There is no particular reason to justify any particular time frame for implementing this enhancement (ITA No. 4850/Mum/2019 Assessment year: 2011- 12) of tolerance band or safe harbour provision. The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis-à-vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are ITA No. 603/Bang/2024 Page 32 of 33 curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of Section 50C, i.e. 1st April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti- avoidance provisions under section 50C will not be invoked. 8. Once legislature very graciously accepts, by introducing the legal amendments in question, that there were lacunas in the provisions of Section 50C in the sense that even in the cases of genuine variations between the stated consideration and the stamp duty valuation, anti-avoidance provisions under section 50C could be pressed into service, and thus remedied the law, there is no escape from holding that these amendments are effective with effect from the date on which the related provision, i.e., Section 50C, itself was introduced. These amendments are thus held to be retrospective in effect. In our considered view, therefore, the provisions of the third proviso to Section 50C (1), as they stand now, must be held to be effective with effect from 1st April 2003. We order accordingly. Learned Departmental Representative, however, does not give up. Learned Departmental Representative has suggested that we may mention in our order that "relief is being provided as a special case and this decision may not be considered as a precedent". Nothing can be farther from a judicious approach to the process of dispensation of justice, and such an approach, as is prayed for, is an antithesis of the principle of "equality before the law," which is one of our most cherished constitutional values. Our judicial functioning has to be even-handed, transparent, and predictable, and what we decide for one litigant must hold good for all other similarly placed litigants as well. We, therefore, decline to entertain this plea of the assessee.' 9. Respectfully following the same, we direct the Assessing Officer to delete the addition. Thus, Grounds of appeal raised by the assessee in this appeal are allowed.” ITA No. 603/Bang/2024 Page 33 of 33 8. Respectfully following the above judgment, we hold that the actual consideration received is within the 10% of tolerance limit as per section 50C(1) third proviso, therefore the actual consideration received is to be considered as sale value for the purpose of computation of Long Term Capital Gain u/s 48 of the Act. and the amendment made by the Finance Act. 2018 will apply in the case of the assessee. Accordingly we allow the ground No. 4 of the assessee. 9. In the result the appeal of the assessee is allowed. Pronounced in the open court on this 26 th day of June, 2024. Sd/- Sd/- ( BEENA PILLAI ) (LAXMI PRASAD SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore, Dated, the 26 th June, 2024. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr.CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.